Slide 3

Interpreting Balance Sheets· Balance sheets are financial statements that record the assets and liabilities of a business at a specific point in time· Assets ­ items owned by a business· Fixed assets ­ items owned by a business expected to be retained for at least one year e.g. buildings· Current assets ­ items that are expected to be turned into cash in the next year e. g. cash, stock· Liabilities ­ monies owed by a business· Current liabilities ­ debts owed by the business payable within a year e.g. creditors· Long term liabilities ­ debts owed by the business which wont be repaid within the next year e.g. bank loan· Balance Sheet Rules· Assets = Liabilities· Total Assets = Fixed assets + current assets· Liabilities = Share capital + borrowings + other creditors + reserves…read more

Slide 4

Capital and Revenue Expenditure and Depreciation.· Capital expenditure ­ spending on items that can be used time and time again in the production process (fixed assets)· Revenue expenditure ­ meets current day-to-day expenses e.g purchase of raw materials and the payment of wages· Depreciation:· The decrease in value of assets over time· This is shown as an expense on the profit and loss account· Fixed assets will be depreciated in value on the balance sheet· Two methods:· - Straight line· - Reducing…read more

Slide 5

Working Capital· Working capital measures the amount of money the business has to pay day-to-day expenses· Working capital = current assets ­ current liabilities· Businesses need to be aware of their working capital and ensure that they have enough cash to survive· Control of Working Capital:· Stock and debtor control ­ arranging appropriate credit terms· Liquidity ­ need to manage assets to ensure that the business has sufficient liquidity (ease of converting assets to cash)· Stock needs to be valued correctly· Need to ensure are not holding excess stocks or excess cash…read more

Slide 6

Window Dressing· These improve the appearance of a companies balance sheet· Can borrow money for a short period of time to improve cash position just before date of balance sheet· Use sale and leaseback Include intangible assets e.g. goodwill / brands on balance sheet· Capitalise expenditure ­ including things as assets that could be classified as expenses…read more

Slide 3

Interpreting Balance Sheets· Balance sheets are financial statements that record the assets and liabilities of a business at a specific point in time· Assets ­ items owned by a business· Fixed assets ­ items owned by a business expected to be retained for at least one year e.g. buildings· Current assets ­ items that are expected to be turned into cash in the next year e. g. cash, stock· Liabilities ­ monies owed by a business· Current liabilities ­ debts owed by the business payable within a year e.g. creditors· Long term liabilities ­ debts owed by the business which wont be repaid within the next year e.g. bank loan· Balance Sheet Rules· Assets = Liabilities· Total Assets = Fixed assets + current assets· Liabilities = Share capital + borrowings + other creditors + reserves…read more

Slide 4

Capital and Revenue Expenditure and Depreciation.· Capital expenditure ­ spending on items that can be used time and time again in the production process (fixed assets)· Revenue expenditure ­ meets current day-to-day expenses e.g purchase of raw materials and the payment of wages· Depreciation:· The decrease in value of assets over time· This is shown as an expense on the profit and loss account· Fixed assets will be depreciated in value on the balance sheet· Two methods:· - Straight line· - Reducing…read more

Slide 5

Working Capital· Working capital measures the amount of money the business has to pay day-to-day expenses· Working capital = current assets ­ current liabilities· Businesses need to be aware of their working capital and ensure that they have enough cash to survive· Control of Working Capital:· Stock and debtor control ­ arranging appropriate credit terms· Liquidity ­ need to manage assets to ensure that the business has sufficient liquidity (ease of converting assets to cash)· Stock needs to be valued correctly· Need to ensure are not holding excess stocks or excess cash…read more

Slide 6

Window Dressing· These improve the appearance of a companies balance sheet· Can borrow money for a short period of time to improve cash position just before date of balance sheet· Use sale and leaseback Include intangible assets e.g. goodwill / brands on balance sheet· Capitalise expenditure ­ including things as assets that could be classified as expenses…read more